How Long Does It Take To Establish Credit?

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You may feel that you are a good credit risk; you have never missed a bill payment your bank balance is healthy and you have no debts. However, who knows that this is the case? If you have never borrowed money nor had a credit card, then you have no credit score, you do not exist other than as a resident at an address who has a bank account. Having a bank account gives you some kind of credit rating, so too does paying bills, but only because you have not defaulted on either. This may seem a little harsh, but to get a credit rating you need to use some credit. How long does it take to establish credit? That will depend on the kind of credit you get and how you use that credit.

The need to establish credit, without getting into financial difficulty

You may wonder whether you need to establish credit, and the answer to that would be no, if you never want to buy a house or a large-ticket item in the future. If you are the kind of person who hates borrowing, you need to be realistic about whether you can truly manage to buy a house without a mortgage, which is borrowing. The approach to building credit is to show the credit agencies and potential lenders that you can take on a financial commitment and meet the regular payments needed to service that commitment. If you take out a loan or a credit card, the question of how long does it take to establish credit can be partially answered by your track record in paying the loan back, and paying off your credit card.

Ways to establish credit

A good start is a credit card as you do not have to be tied into this in a borrowing sense, for longer than the interest free period. Essentially you can pay for goods on your credit card and then pay off the balance within 20 to 25 days, depending on the card issuers' terms and conditions. You do not pay interest you have shown the credit agencies that you are sensible, and you build up your credit score. How long does it take to establish credit with one small credit card commitment? This will also depend on how much of your credit limit you use. Keep your credit card usage to 30% of your limit, make a necessary payment, e.g. a utility bill using the card each month and paying off the balance in full each month. It takes at least two years before you even register on the radar as being worthy of a good FICO score, and then it will only happen if you demonstrate a spread of types of credit, so get a store card and maybe at some point a car loan. Do not overstretch yourself for the sake of a credit score, if you can manage most of your finances using cash then be selective and careful about stepping into the credit jungle.


Source: Credit Cards For People With Bad Credit Rating

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